 | Retail Sales Increased 0.1% in April |
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| Posted Under: Data Watch • Retail Sales |
Implications: Despite a large drop in gasoline prices, which tends to drag down spending, retail sales beat consensus expectations in April and were revised up for prior months. Excluding gas stations, sales were up 0.7% in April. "Core" sales, which exclude autos, building materials, and gas, rose 0.5% in April and 0.9% including upward revisions to prior months. These revisions, along with recent data on trade, construction, and inventories, suggest Q1 GDP grew at a 2.6% annual rate instead of the 2.5% originally reported. Along with an increase in auto sales in April, consumers spent more at department stores, over the internet and through mail-order. Despite the end of the payroll tax cut, retail sales are up at a 2.1% annual rate so far this year, while core sales are up at a 3.2% rate. This growth is nothing to write home about (it's still Plow Horse growth), but much better than many analysts were projecting at the beginning of the year. For the rest of 2013, we still expect two major themes to play out for the consumer: first, an acceleration in consumer spending growth despite higher taxes; second, a transition away from growth in auto sales and toward other areas, like furniture, appliances, and building materials. Consumer spending should accelerate because of continued growth in jobs, hours, and wages. In addition, households have continued to cut debt levels, while interest rates remain low. Households in the US have the lowest financial obligations ratio since 1981. All this means that a recession remains highly unlikely. The Plow Horse is alive and well.
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